Piraeus announced it targets 10% RoTE by 2024: Based on -10% NII, +40% fees, +70% other income, -12% cost cutting and -50% impairments vs. 2020 – or a normalized CoR of 70bps. The bank seems comfortable operating at 8%-9% fully loaded CET1 in 2021-2022 in order to get rid of E21bn of NPEs in the next 12 months. Achieved via Hercules securitizations (E18bn, o/w E7bn completed), outright sales (E1.4bn) and organic actions (E3.5bn) – slightly offset by inflows of E1.7bn including pandemic related ones. Management confirmed it will be raising E1.0bn of equity within April via a book-building process; new shares (issue price unknown) to commence trading in May. Combined with bond gains of E400m, merchant card sale gains of E300m and organic earnings of E1.4bn (2021-2024) to absorb P&L/equity losses of E4.0bn from NPE reduction.
Reconciling RoTE targets with P&L earnings we infer net income is guided at c. E600m in 2024 on TBV of c.E6.0bn. The above imply shares currently trade…

Piraeus Bank announced the completion of Vega NPE E4.9bn securitization. As was the case with Phoenix, Intrum AB will buy 30% of mezzanine notes, 5% will be retained by the bank (along with 100% of senior notes) and 65% will be distributed to shareholders (we assume via a listing similar to Cairo Mezz). Based on disclosed numbers and metrics we present our calculations and thoughts…

Why swapping GGBs? It is the only way to M2M and book the upside (and keep on board) all or part of those GGBs classified as Held to Collect and which are amortized at cost. The alternative would be to sell them (at current – higher- prices) and re-buy them from the market. The swap demonstrates in the most powerful way, the impact of QE and lower interest rates…

If Greek Banks do not believe in Santa Claus after recent developments, then no one ever will: a) on December 10, the ECB prolonged its targeted lending support (TLTRO III @ -1%) by an additional 12 months while raising the maximum amount banks can borrow (55% from 50%); b) the expanded PEPP will include E31bn of GGBs (from E23bn); c) the GR government will reportedly extend the NPE guarantee scheme ‘Hercules’ into 2021-2022. For Greek Banks this translates to an excellent opportunity to support their earnings (funding cost, bond gains) while cleaning up their Greek NPEs (securitizations) by 2022. For investors it means they can now focus on RoTE 2022 and beyond. We upgrade our rating on…

With this note we present our thoughts on Piraeus Bank Contingent Convertible bond (CoCo) potential conversion into equity. We cannot help feeling there is a lack of a strategy, especially from the state’s side, on how and when to exit its holding in Piraeus Bank and at what price. On a second note, the alleged share capital increase proposal by a group of shareholders draws the attention to the elephant in the room: which is how will Piraeus further reduce its NPE backlog, over and above the E7bn combined NPE securitizations currently in the making. Needless to say we remain…